Study of Buffett and recent watch on Buffett
And I – like so many others who (as I like to say) “pray in the church of the famed Benjamin Graham, David Dodd, Warren Buffett, and Charlie Munger” – am one of his happy followers.
So today, I’ll share some of the highlights from his annual letter…
Buffett starts by outlining the characteristics of the types of businesses he likes to own, whether outright (as one of nearly 100 subsidiaries of Berkshire Hathaway) or in part (as shares of publicly traded companies):
Our goal at Berkshire is simple: We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring.
Within capitalism, some businesses will flourish for a very long time while others will prove to be sinkholes. It’s harder than you would think to predict which will be the winners and losers. And those who tell you they know the answer are usually either self-delusional or snake-oil salesmen.
At Berkshire, we particularly favor the rare enterprise that can deploy additional capital at high returns in the future. Owning only one of these companies – and simply sitting tight – can deliver wealth almost beyond measure. Even heirs to such a holding can – ugh! – sometimes live a lifetime of leisure.
He believes that Berkshire’s future outperformance will likely be driven by the ever-present – and, in fact, increasing – speculative, gambling behavior of other investors (which he rightly decries) and, even more important, occasional market panics:
Berkshire’s ability to immediately respond to market seizures with both huge sums and certainty of performance may offer us an occasional large-scale opportunity. Though the stock market is massively larger than it was in our early years, today’s active participants are neither more emotionally stable nor better taught than when I was in school.
For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young. The casino now resides in many homes and daily tempts the occupants.
Buffett also says that we should never forget one fact of financial life:
Wall Street – to use the term in its figurative sense – would like its customers to make money, but what truly causes its denizens’ juices to flow is feverish activity. At such times, whatever foolishness can be marketed will be vigorously marketed – not by everyone but always by someone.
Occasionally, the scene turns ugly. The politicians then become enraged; the most flagrant perpetrators of misdeeds slip away, rich and unpunished; and your friend next door becomes bewildered, poorer and sometimes vengeful. Money, he learns, has trumped morality.
At the very front of the annual report, Buffett shared this beautiful eulogy of Munger, which I want to share in its entirety – including Buffett’s formatting:
We should all hope to have at least one friend who would write something so heartfelt about us!
To learn more about Munger and his teachings, simply doing a quick Google search will bring up hundreds of videos, interviews, and articles. I would suggest starting with his 1995 classic, “24 Standard Causes of Human Misjudgment” (transcript here and audio here).
There are also well over a dozen books about Munger. But Peter Kaufman’s biography, Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, stands head and shoulders above the rest.
- 05/02/2022 – notes from 2022 BERKSHIRE ANNUAL MEETING
Watch Warren Buffett and Charlie Munger preside over full Berkshire Hathaway annual meeting
- till 1:00:00 – market is like casino because wall street promotes it to make money on trading commission (e.g. short term option trading). Berkshire took advantage on this and bought 14% of OXY shares in 60% total shares outstanding. We are success, not because we are smart, but because we are sane.
- till 2:00:00 – 1:30:19
- till 3:00:00 –
- till 4:00:00 –
- till 5:00:00 –
- till 6:00:00 –
- 05/01/2022 – Buffett and Munger on Oil stocks at BH meeting 2022
🛢️Buffett & Munger on #Oil!
Buffett: It's hard to say which of us knows less about oil
Munger: we should hold much larger oil reserves in the SPR and elsewhere because it will be worth a lot more in the future
Buffett: rapid energy transition odds are extremely low. #oott pic.twitter.com/juQVV1RTZB
— Josh Young (@Josh_Young_1) April 30, 2022
Buffett: the best guard against inflation is being the best at what you do.
Also Buffett: buying o&g stocks hand over fist.
I guess if you can't be the best at what you do, and even if you are the best, buy oil and gas stocks? "Do what I do, not what I say"? #inflation #oil pic.twitter.com/gMD2plAin7
— Josh Young (@Josh_Young_1) April 30, 2022
- 10/23/2019 – How to Learn Investing, According to Warren Buffett and Benjamin Graham Valuing companies is an art that’s best learned with practice – therefore, I need to reuse gurufocus score system to evaluate individual stock
Buffett has advocated a similar approach to the one Graham used to teach his students. Speaking at the 1998 Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) annual meeting of shareholders, Buffett said the way Graham liked to teach was to play “various little games:”
“Sometimes he would have us evaluate company A and company B with a whole bunch of figures, and then we would find out that A and B were the same company at different points in its history, for example.”
The goal of this process was to “get us to think about what were the key variables and how could we go off the track.” This process is the perfect way to teach investors how to value companies.
“But I would, you know, if I were teaching a course on investments, there would be simply one valuation study after another with the students, trying to identify the key variables in that particular business, and evaluating how predictable they were first, because that is the first step. If something is not very predictable, forget it. You know, you don’t have to be right about every company. You have to make a few good decisions in your lifetime. But then when you find — the important thing is to know when you find one where you really do know the key variables — which ones are important — and you do think you’ve got a fix on them.”
No correct answer
Charlie Munger (Trades, Portfolio) added that it is also essential to understand that there is never a right answer in business valuation.
Unlike real estate appraisal, the value of a business will always depend on multiple different factors, some of which you will never know or understand. It is vital to incorporate these in the process, which is one of the reasons why Buffett and other value investors like to include a margin of safety when buying a stock.
- 04/21/2018 – Study of Buffett
Buffett Watch
